I love searching for interesting articles that could educate anyone that is in the process of, or thinking about, starting a home craft business (though I think this article could apply to many types of business). This article really gets you thinking. The author shares her many experiences and failures growing her business. The article is from The Crafts Report, by Patrice Lewis. If you would like to read the entire article, I have posted it at the end of the article. ENJOY!
How NOT to Finance a Home Craft Business
If you fantasize about starting your own home craft business, I’m willing to bet a lot of your dream revolves around such things as giving up the commute, being able to call your own shots, setting your own hours, and spending more time with your family.
Usually, a person’s dreams and plans like these come after a person looks at someone who already has an established and successful home craft business.“Look at these people! Aren’t they lucky! They don’t have to drive through the snow to get to an office! All they have to do is walk across the driveway, and they’re at work!”
The trouble with this vision is that the wanna-be entrepreneur is only seeing a snapshot of the business owner’s current success, and they assume it sprang – boing! – effortlessly into being, sort of like those nifty mushrooms that grow overnight on your lawn. No preparation, no planning, just boing.
Not.
Rather than comparing an established home craft business to those rapid mushrooms, you should compare it to an oak tree. It’s slow to get started, but sturdy and strong once it’s established. This should be the pattern for your home craft business.
Boinging into Business
Go back to those dreams of working at home, of making your income from your own labor, of avoiding the commute, of spending more time with your family, etc. These are sweet dreams, and in no way do I want to discourage them. I just want to make you see them realistically.
Spurred by these wonderful fantasies, some people decide on a product to make (boing!), quit their jobs (big boing!), use their credit card to purchase the necessary raw materials and tools (boing!), pay rent on a shop space instead of using their garage (boing!), and begin production.
Then comes reality. Most home craft businesses don’t start out with a bang (or a boing).They grow slowly, like those oak trees.
The folks who “boing” into business are in for a nasty financial shock if things don’t go exactly as they fantasized.
Start-Up Costs
So, if you can’t (or shouldn’t) start a home craft business with a boing, where do you get the money to start? What about the nitty-gritty of financing a home craft business?
First, I can say, from experience, don’t quit your day job. Trust me on this. Eighteen years ago, my husband and I did just that – and regretted it.
Now, for the bright side. Getting the tools and raw materials for starting a home business may be easier than you think. Most people don’t just pluck a successful home craft business idea out of thin air. They start the business by expanding an existing hobby, talent, skill, or trade. That means that many times they already have the basic tools or materials or knowledge needed to make the product.
Or, alternatively, think of a home craft product that is compatible with the tools you already own. Tools such as a sewing machine or a band saw are versatile and easily adaptable to any number of crafts.
Do you have space on your property to run a business? If you have close neighbors, they may object to loud power tools. Do you have a shop or a garage or a spare bedroom you can devote to your business? Do you have a computer for billing and internet purposes? Are you prepared for shipping?
Sacrificing for a Reason
Finding the money for a start-up small business is not easy. It’s not supposed to be easy. If it were easy, everyone would be doing it. Like anything worth doing, it usually requires a complete philosophical change from immediate gratification to deferred rewards.
So how do you raise the cash for all the tools and supplies you might need? How about for the advertising, display or show fees, raw materials, etc.? How can you do this without going into debt?
You use the principles of deferred rewards.
Deferred Gratification
Even if you’re as thrifty as can be and apply all your spare money toward funding the business, life can get in the way.
When we started our home woodcraft business, our workshop consisted of a 10-foot x 10-foot chicken coop. Much of the time, shop work either spilled outside (in good weather) or into the house (in bad weather).Or, to put it another way, we frequently lived in our shop. It took five years for us to pull together enough money to build a comparatively palatial 20-foot x 20-foot shop building.
The Debt Trap
Coupled with the desire to work at home is the frequent wish for instant business success (boing!), which is, let’s face it, an irrational desire to have everything go perfectly from the beginning and to have your business become a rousing success without much effort.
Yeah, that would be nice. I’d like to win the lottery, too.
If you’re a first-time hobby-into-business entrepreneur, don’t ever, ever, ever go into debt to finance your home business. Aside from the idea that going into debt is questionable to begin with, there is the very real possibility that your business will fail in this economy, and then you’re left with the bitter regret of a failed business and heavy debt to boot.
When my husband and I started our home craft business in 1993, that’s exactly what we did; we went into debt. That’s why I don’t suggest it. In our case, it took years to dig ourselves out of the debt-laden hole we dug while getting our business on its feet. Had we properly planned things, the debt (and stress) could have been avoided.
Give yourself time to develop your customer base, increase the speed and efficiency in making your product, and develop your marketing knowledge. Don’t sink yourself into debt getting started because of wishful thinking or misplaced optimism. Obviously, you’ll need the raw materials and tools to make the product, but work your way up toward better items as you begin to bring in income.
Reality Check
What are some of the things you’ve heard you’re supposed to do before starting a business?
You must have a business plan. Otherwise, you will fail.
You must incorporate. Otherwise, you will fail.
You must establish credit. Otherwise, you will fail.
You must buy only the best (equipment, supplies, etc.), because quality and façade (how others see you) are what’s important.
Must, must, must. Why must we do things this way?
In part, it’s because most business advice applies to larger enterprises than a home craft business. But millions of businesses have started modestly, with used equipment, borrowed spaces, and family labor. There is no better and more satisfying thing than to start this way, because then your successes have been earned by the sweat of your brow.
Dream big, start small. Don’t do the opposite.
Remember: Bill Gates started in his garage. You can, too.
For the entire article by Patrice Lewis http://www.craftsreport.com/component/content/article/232.html
Filed Under:
Life of a Craft Business
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